Acc Confirms Its Investment In Centreport Buildings Is A One-Way Bet

ACC confirms its investment in CentrePort buildings is a one-way bet
HAMISH RUTHERFORD
Last updated 15:31, December 1 2016

KEVIN STENT/Fairfax NZ
BNZ initially indicated it would move back into the Harbour Quays building quickly, but later admitted damage from the November 14 earthquake would see it closed for "months".

The Accident Compensation Corporation (ACC) could end up owning CentrePort's commercial property assets, under a joint venture agreement which protects the fund from losses.

In 2011 CentrePort, jointly owned by the Wellington and Horizons regional councils, signed a deal which - as it was described - would see ACC take a 50 per cent interest in its commercial property interests.

CentrePort had earlier offered for sale Statistics House, Customs House and BNZ Harbour Quays, all of which have been closed since the November 14 earthquake.

KEVIN STENT/FAIRFAX NZ
Two floors in Statistics House partially collapsed in the November 14 earthquake.

However the deal with ACC was a loan which it will convert into equity at a point in the future.

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So if the value of the buildings drops, it appears CentrePort would incur full effect of the losses.

ACC is refusing to release details of the agreement, but has confirmed the structure of the arrangement protects it from losses in the event that the asset value of the joint venture companies which own the three buildings fall.

"ACC has provided debt to the companies that own each of the three properties in the Harbour Quays development," ACC said in a statement.

"The debt will at a point in the future convert to equity in each of the companies."

CentrePort's 2012 annual report described the investment as "mandatory convertible notes" suggesting ACC would be compelled to convert the loan into equity in the property companies - rather than demand repayment - although ACC has refused to answer questions on its options.
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The deal includes leases on the ground beneath the buildings which will last another approximately 120 years.

While it has not been disclosed how much ACC put into the venture, it appears to have been around $75 million.

Financial statements from 2012 show CentrePort valued its interest in the joint ventures at $75 million, while in that year its borrowings dropped by $76m.

When the deal was announced, CentrePort's then chief executive Blair O'Keeffe said the price paid by ACC was "in line with the value of the assets".

The annual returns to ACC from the loans have not been disclosed.

Since 2014 CentrePort has published only abbreviated financial statements, which disclose much less about its financial position.

CentrePort has said it is "well insured" but has declined to give details.

It has not responded to requests for comment on its agreement with ACC.

While Statistics New Zealand has repeatedly denied that a decision has been made to demolish its former headquarters, no definitive statement bas been made about the building's future.

Meanwhile the department is signing leases for office space elsewhere in Wellington, for at least the next two years.

BNZ initially indicated it would move back into the Harbour Quays buildings shortly after the quake, but later said the building would be closed for months.

On November 22, Richard Griffiths, BNZ's director of strategy and business performance, said the company would move staff back into the building - which was also closed for months after the 2013 earthquake - if it received sufficient assurances about safety.

"We have quite a stringent sign-off process and if we're completely assured that we're good to get back in then we'll do it in a staged manner."

On Thursday, BNZ was showing groups of staff through the building.

While it has been assessed as structurally sound, Customs House is also closed pending further engineering reports.

On Tuesday, Greater Wellington Regional Council (GWRC) chairman Chris Laidlaw said the council was not "spooked" by its arrangements with CentrePort, as he vowed not to let the port fail and raised the prospect of a central government bailout.

GWRC, which owns 77 per cent of CentrePort, has guaranteed the company's debt up to $150m.

In return for the guarantee - which would allow CentrePort to borrow money more cheaply than it otherwise could - CentrePort pays the council a fee.

The amount of the fee has not been disclosed, but Laidlaw said it was no a "derisory" amount.